Indian Tribal Sovereign Immunity Asserted in an IPR

The America Invents Act (“AIA”) provides for post grant challenges of U.S. patents in the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. One type of AIA proceeding, Inter Partes Review (“IPR”), came into effect in September 2012, and provides a process for relatively quick determination of invalidity of challenged patent claims based on published prior art. [1] IPR decisions rendered in the past five years have created a body of law addressing a variety of issues related to invalidity challenges before the PTAB. In a recent IPR proceeding, a novel strategy has arisen that posts an interesting question of first impression, whether the assignment of a patent involved in an IPR proceeding to a U.S. Indian tribe can avoid an IPR proceeding based on a sovereign immunity defense. The present blog post summarizes the new issue that the PTAB will be required to decide in the IPR.

IPRs initially were utilized primarily to attempt to invalidate patents in the electronic or mechanical arts. However, recently patents in the pharmaceuticals field have been subject to increasing IPR’s challenges. The issue discussed here involves a pharmaceutical patent. On June 3, 2016, Mylan Pharmaceuticals Inc. petitioned for an IPR of U.S. Patent 8,685,930 (the “’930 patent”), then owned by Allergan, Inc., covering Restasis®, an ocular formulation for treating dry eyes (the “Mylan IPR”).[2] The PTAB rendered a Decision to institute IPR on December 8, 2016.[3] Mylan was later joined by Teva Pharmaceuticals USA, Inc. and Akorn Inc. in this IPR proceeding. On September 8, 2017, Allergan filed a Patent Owner’s Updated Mandatory Notices to inform the PTAB that the Saint Regis Mohawk Tribe (“Tribe”) had become a real party-in-interest based on an Assignment of the ‘930 patent from Allergan to the Tribe on the same day.[4] In the Patent Owner’s Updated Mandatory Notices, the Tribe made a special appearance to request the PTAB to stay all proceedings in the IPR pending resolution of the Tribe’s motion to dismiss the IPR based on sovereign immunity, stating that the Tribe does not consent to the IPR.[5]

The PTAB held a telephonic hearing on September 11, 2017, with participation by counsel representing Mylan, Teva, Akorn, Allergan, and the Tribe.[6] During the hearing, the Tribe discussed its assertion of sovereign immunity. Mylan made counterarguments against the sovereign immunity defense as well as the Tribe’s proposed motion to dismiss based on sovereign immunity.[7] The PTAB rendered an Order on September 19, 2017, concluding that “briefing on the issue of Tribe’s alleged tribal sovereign immunity from these proceedings is warranted” and authorized the Tribe to file a motion to terminate the IPR on the basis of sovereign immunity and the petitioners to file an opposition to the motion.[8]

Allergan publicly announced on September 8, 2017, that it had assigned, to the Tribe, the patents covering certain eye drops for dry eye treatment.[9] The Tribe gave Allergan an exclusive license on the patents, including the ‘930 patent, and in return Allergan paid the Tribe $13.75 million upfront and will pay an annual royalty of $15 million.[10] The Tribe will file a motion to terminate the IPR based on tribal sovereign immunity.[11] Allergan’s assignment of the patents on the eye drops to the Tribe was a bid to end the IPR.[12] Allergan stated that it reached the deal with the Tribe after reviewing prior decisions of the PTAB in terminating IPR proceedings on sovereign immunity grounds.[13]

According to the Eleventh Amendment, “Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[14] The Eleventh Amendment does not prevent a State to be sued by another State or the Federal Government, but it does provide the State immunity from suits by private parties unless consented by the State.[15] In Federal Maritime Commission v. South Carolina State Ports Authority, the Supreme Court held that because proceedings held in the subject administrative adjudication by a State agency are overwhelmingly similar to civil litigation in courts, state sovereign immunity under the Eleventh Amendment extends to the adjudicative administrative proceedings in that case.[16]

Three different panels of the PTAB recently held that entities of state governments are not subject to IPRs because of sovereign immunity. The first holding was rendered by the PTAB in January 2017 in Covidien LP v. University of Florida Research Foundation Incorporated.[17] In Covidien, the PTAB determined that the Supreme Court’s analysis in Federal Maritime Commission applied to the IPR being decided by the PTAB.[18] The PTAB concluded that considerable procedural similarities between IPR and civil litigation are “sufficient to implicate the immunity afforded to the States by the Eleventh Amendment” in the IPR, an adjudicative administrative proceeding.[19]

However, the sovereign immunity of States is not without limit: Congress has the authority to abrogate the States’ sovereign immunity if Congress, acting via a valid exercise of power, has unequivocally expressed its intent to abrogate the immunity, wherein the intent must be obvious from a “clear legislative statement.”[20] In Covidien, the PTAB could not find any “unequivocal, express intent by Congress in the AIA to abrogate immunity for the purposes of inter partes review.”[21] The PTAB was “persuaded that the Eleventh Amendment immunity bars the institution of an inter partes review against an unconsenting state that has not waived sovereign immunity.”[22] As a result, University of Florida Research Foundation Incorporated, as an arm of the State of Florida, was held by the PTAB to enjoy State sovereign immunity under the Eleventh Amendment in the IPR.[23]

In the second related IPR, Neochord, Inc. v. University of Maryland Baltimore, another panel of the PTAB was called upon to decide whether the Eleventh Amendment immunity for the State of Maryland was applicable in the IPR.[24] This panel of the PTAB stated that the Covidien decision of the other panel was not binding in the case.[25] This panel of the PTAB went through a very similar analysis made according to Federal Maritime Commission v. South Carolina State Ports Authority as performed by the panel in Covidien. The PTAB held that University of Maryland Baltimore could properly move to terminate the IPR by exercising the sovereign immunity of the State of Maryland under the Eleventh Amendment because of the high similarity of the procedures between IPR proceedings and civil litigation, and because Congress has not abrogated the immunity.[26]

In the Neochord IPR, there was an immunity waiver issue not present in Covidien. In Neochord, the University of Maryland Baltimore had granted a license on its patent, in which the license agreement included language whereby the University of Maryland Baltimore waived its sovereign immunity as it related to the licensee and reserved its sovereign immunity against any non-parties of the license.[27] The PTAB determined that the waiver was not a general waiver of sovereign immunity by the University of Maryland Baltimore, and concluded that the IPR could not be maintained.[28] By contrast, the Allergan-Tribe license specifically states that the Tribe “has not and will not waive its sovereign immunity.”[29] Notwithstanding the differences between the licenses at issue in the Neochord and Mylan IPR proceedings, it is expected that, in the briefs to be filed by the Tribe and Mylan, issues such as whether there is immunity waiver for the Tribe will be argued by both sides.

In the third related IPR, Reactive Surfaces Ltd., LLP v. Toyota Motor Corporation, the panel recognized that the Covidien and Neochord decisions are not binding on it, but it did find the reasoning of the other two panels persuasive.[30] Going through very similar analysis, the Reactive Surfaces panel held that the Regents of a state university, which were the co-owners of the patent challenged in the IPR, enjoy the state’s sovereign immunity under the Eleventh Amendment, and consequently the PTAB dismissed the Regents from the IPR proceeding.[31]

In the three PTAB decisions discussed above, where sovereign immunity was found in the IPR proceedings, all the involved parties are entities of a state government. The Tribe, of course, is not a state or state entity. However, according to the Supreme Court in Michigan v. Bay Mills Indian Community, Indian tribes are “domestic dependent nations” that enjoy common-law sovereign immunity from suit that sovereign powers typically enjoy.[32] The Supreme Court has, in a number of cases, treated tribal sovereign immunity as settled law and dismissed any suit against Indian tribes unless there is a waiver or congressional authorization.[33] As dependent nations, Indian tribes are subject to plenary control by Congress.[34] Therefore, Congress has the authority to abrogate tribal sovereign immunity if Congress makes an express, unequivocal abrogation.[35] In the Mylan IPR proceeding, the Tribe attempts to assert its common-law sovereign immunity in an adjudicative administrative proceeding, which is not an Article III suit.

Takeaway

The issue of whether the defense of tribal sovereign immunity in avoiding an IPR proceeding is a question of first impression for the PTAB and will be closely watched by patent law practitioners. The significance of the Mylan case could potentially extend beyond IPRs. There is a question of whether a similar approach could be taken in patent litigation such as ANDA litigation. What the future holds for the potential application of tribal sovereign immunity as related to patents could be important for patent holders, alleged infringers, and, of course, Indian tribes.

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